Don’t believe the hype: Silicon Valley is still the global epicenter of entrepreneurism

In the long list of “unprecedented” events during the last year, it’s almost possible to overlook those in Silicon Valley. Amid the historic outbreak of COVID-19, a global economic downturn and a generational moment of reckoning on race in America, some people might have missed the shifts happening here.

Some of our industries and companies have shown record-shattering growth. Conversely, in Silicon Valley on the whole, regional job losses have exceeded the numbers of the dot-com bubble. Some of our most iconic Silicon Valley companies have relocated operations, staff and, in some cases, headquarters out of state.

At the same time, in the first quarter of 2021, the top three Initial Public Offerings were all Silicon Valley/Bay Area companies. Together they created over $60 billion in shareholder value.

It has not been a period of clear signals to say the least.

It has been, coincidentally, the beginning of my tenure as CEO at the Silicon Valley Leadership Group. I recently celebrated my first six months on the job like so many of you — on a Zoom call. As we emerge from the pandemic, I hear the renewed worry and speculation about the worst on the horizon for the Golden State. This has led to direct calls from business and community leaders to me asking how California can be more competitive.

First, let’s be real: California will never win an affordability contest versus Texas or Florida or other low-cost states. That’s always been the case. But California, and Silicon Valley, offer a different and iconic value. Our competitive advantage is embedded in our entrepreneurial ecosystem and our dynamic industries and research institutions. And our numbers bear it out.

Despite an exploding pandemic that disproportionately affected communities of color, a strained economy and disruption in nearly every level of society, one thing has held fast: Silicon Valley’s core innovation infrastructure has remained robust. Despite talk of an exodus, the math says people are not leaving California, or even the Bay Area, in droves. According to a recent Postal Service report, they are instead relocating to more affordable areas nearby.

So, don’t believe the hype: Silicon Valley is still the global epicenter of entrepreneurism and remains home to thousands of leading technology companies.

But the cost-benefit dynamics are quickly shifting away from us, and this must be addressed. Technological innovations gave our industries a lifeline and offered resiliency through the pandemic. Yet those same advances have also very tangibly demonstrated the opportunity set that remote work affords. This places even greater pressure on California’s value proposition for businesses. It’s made harder when taxes are added without smart policies to drive them.

Ultimately, capital flows follow value, talent and profitability — which our companies continue to generate. This is not a given, however. If we want to ensure that the data points of companies leaving don’t become a pattern post-pandemic, we need to make significant changes to add more to the California value proposition.

It’s time to reimagine our public policies with the same startup energy that created Silicon Valley. This means we need entrepreneurial policies that reflect that mindset. We need investments that harness our competitive advantage and double down on it. We need to be agile, like a startup, to pivot from the policies of the past.

A startup mindset isn’t just about stopping what doesn’t work, but about testing what does, like providing certainty with a multi-year moratorium on new business taxes, or encouraging ventures to scale with lower taxes for startups just turning a profit or supporting entrepreneurs with licensing and incorporation fees permanently eliminated for new California companies.

This is about catalyzing entrepreneurial public policy. It’s also about making sure policies encourage targeted investment, job growth and equity — with clearly defined goalposts for each aim. But creating new companies isn’t enough if living near those jobs, affordably, is nearly impossible.

The median sale price for existing homes in our state is among the very highest in the country. To increase our housing stock, and opportunities for all families, we need more market-based solutions to fund infrastructure via private development or social impact weighted public-private partnerships aligned with like-minded investors.

It’s long past time to apply practical values to our development. For example, the California Environmental Quality Act should not delay projects that are often better, not worse, for the environment.

Business competitiveness is not a zero-sum problem. As the recovery builds steam there will be opportunities for states like Texas to grow businesses that make sense for them. And there will also be ways for California to further ramp up the innovation that drives our economy. The pandemic has created the inflection point we now face, but a long road of choices preceded it. It is up to California to pivot, and to plot a new path forward.

Luckily, we are a state that knows something about that.

We should embrace the startup mindset we’ve famously pioneered to create a brighter collective future. It will take bold new approaches to generate shared economic value, but sometimes you have to be a disruptor to win. So, as other locations in America make their pitches to be the next great centers of enterprise, we have one, too.

It should be California, and we live here already. Our pitch for the next great innovation hub? Silicon Valley should be the next Silicon Valley.